FRANKLIN (MALINDA), ET AL. VS. SAFE AUTO INSURANCE COMPANY
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RENDERED: MAY 1, 2009; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-000615-MR
MALINDA FRANKLIN, CHARLES FRANKLIN
AND JEFFREY HOWELL
v.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE MARTIN F. MCDONALD, JUDGE
ACTION NO. 04-CI-004283 AND 04-CI-008751
SAFE AUTO INSURANCE COMPANY
AND
NO. 2008-CA-000699-MR
NATIONWIDE PROPERTY AND CASUALTY
INSURANCE COMPANY
v.
APPELLEE
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE MARTIN F. McDONALD, JUDGE
ACTION NO. 04-CI-004283 AND 04-CI-008751
SAFE AUTO INSURANCE COMPANY AND
CHARLES FRANKLIN
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: DIXON, KELLER, AND WINE, JUDGES.
WINE, JUDGE: Malinda and Charles Franklin (“the Franklins”) and Nationwide
Property and Casualty Insurance Company (“Nationwide”) appeal from a summary
judgment in favor of Safe Auto Insurance Company (“Safe Auto”). The trial court
found that the Franklins were not the owners of a vehicle at the time it was
involved in an accident, and therefore it was not a covered vehicle under the
Franklins’ policy with Safe Auto. We agree with the Franklins and Nationwide
that title to the vehicle passed to the Franklins when the seller delivered the
completed certificate of title to them. Consequently, we find that they were the
owners of the vehicle for purposes of insurance coverage and were entitled to
summary judgment on this issue.
The relevant facts of this action are not in dispute. In 2003, the
Franklins secured a policy of motor vehicle insurance from Safe Auto. The policy
period covered October 26, 2003 to April 26, 2004. Charles was listed as an
additional driver under the policy. Their two vehicles, a 2001 Ford Taurus and a
1986 Buick Regal, were listed as covered vehicles under the policy. In addition,
the policy provided coverage for thirty days after they became the owners of any
additional vehicle.
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On February 3, 2004, Charles purchased a 1984 Dodge RAM pickup
truck from Shawn Nadeau (“Nadeau”). Charles paid Nadeau $2000.00 for the
truck. The following day, on February 4, 2004, Charles and Nadeau signed and
executed the Transfer of Title by Owner Section of the certificate of title for the
truck. Their signatures were both notarized at that time. Charles then took
possession of both the truck and the certificate of title.
However, when Charles and Nadeau went to the county clerk’s office
to file the transferred title, they discovered that there was still a lien on the vehicle.
As a result, the title transfer could not be completed at that time. Nadeau went to
the lien holder the following day and paid off the lien.
The next day, February 6, 2004, Charles was involved in an accident
in the truck. Charles was driving northbound on Greenbelt Highway in Jefferson
County. Jeffrey Howell (“Howell”) was sitting in the passenger seat. As the truck
approached the intersection of Greenbelt Highway and Lower Hunters Trace, a
vehicle driven by Larry Easterly, Jr. (“Easterly”)1 turned left in front of the truck.
Both Charles and Howell were injured as a result of the collision. In addition, the
pickup truck sustained damage in excess of its value, rendering it a total loss.
Since the truck had been totaled, Charles did not file the registration paperwork for
it.
After the accident, Charles and Howell both applied to Safe Auto for
basic reparation benefits (“BRB”). Safe Auto denied the claims. Thereafter,
1
The briefs and pleadings spell Larry Easterly’s surname several different ways. In the interest
of consistency, we will refer to him as “Easterly.”
3
Howell applied for BRB through the Kentucky Assigned Claims Plan pursuant to
Kentucky Revised Statutes (“KRS”) 304.39-160(1). The Assigned Claims Bureau
assigned the claim to Nationwide. Nationwide then elected to pursue its claim
against Safe Auto, or in the alternative, against Charles.
On May 19, 2004, Safe Auto filed a declaratory judgment action
against the Franklins and Jeffrey Howell. It sought a declaration that Charles did
not own the Ford pickup truck on February 6, 2004, and therefore, it was not a
covered auto under the policy. Nationwide filed an intervening complaint against
Safe Auto and Charles, seeking to recover the BRB which it paid to Howell. In a
separate action filed on October 15, 2004, Charles and Howell filed suit against
Safe Auto and Easterly. The two complaints were later consolidated into this
action.
Easterly failed to respond to the complaint, and the trial court entered
a default judgment against him. Following a period of discovery, the matter was
submitted to the court on cross-motions for summary judgment. After considering
the arguments of counsel, the trial court granted Safe Auto’s motion for summary
judgment. The court found that Nadeau was the record owner of the truck as of the
date of the accident, and therefore, the truck was not a covered vehicle under the
Safe Auto policy. The Franklins and Howell appeal from this judgment, and
Nationwide filed a separate notice of appeal. These appeals are now consolidated
before this Court.
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The central issue in this appeal concerns who was the owner of the
truck for purposes of insurance coverage under the Motor Vehicle Reparations Act
(“MVRA”) and the Safe Auto policy. KRS 186.010(7)(a) defines “owner” to
mean:
a person who holds the legal title of a vehicle or a person
who pursuant to a bona fide sale has received physical
possession of the vehicle subject to any applicable
security interest.
Similarly, the Safe Auto policy defines a “covered vehicle” as follows:
Covered vehicle means:
1. any vehicle shown on the declarations page;
2. any additional vehicle on the date you become the
owner if:
a. you acquire the vehicle during the policy period
shown on the declarations page;
b. we insure all vehicles owned by you; and
c. no other insurance policy provides coverage for
that vehicle.
The Safe Auto policy further defines “owner” to mean:
“Owner” means any person who, with respect to a
vehicle:
1. holds legal title to the vehicle;
2. has legal possession of the vehicle that is subject to a
written security agreement with an original term of six
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(6) months or more; or
3. has legal possession of the vehicle that is leased to that
person under a written agreement for a period of six
(6) months or more.
The parties agree that the interpretation of these sections are governed
by the holdings in Nantz v. Lexington Lincoln Mercury Subaru, 947 S.W.2d 36
(Ky. 1997), and Omni Insurance Company v. Kentucky Farm Bureau Mutual
Insurance Co., 999 S.W.2d 724 (Ky. App. 1999). In Nantz, supra, the dealer
provided all the legal documents necessary for the purchaser to obtain title. The
purchaser failed to file those documents with the county court clerk's office and
also failed to obtain automobile liability insurance. After the purchaser was
involved in an accident, the victims of that accident sued the dealer alleging that
title had not passed and that the dealer was responsible for insurance coverage for
the accident. The Kentucky Supreme Court held that title passes to the purchaser
when the dealer completes and signs the assignment of title section on the
certificate of title, signs the odometer statement, and delivers the completed title to
the purchaser. Id. at 38.
Nantz dealt with a transfer of title between a commercial dealer and an
individual buyer. In Omni Insurance Company v. Kentucky Farm Bureau Mutual
Insurance Co., supra, this Court addressed when title transfers between an
individual seller and an individual buyer. In Omni, a father purchased an
automobile for his nineteen-year old son, who was in the military. The father and
the seller completed the vehicle transaction record and assignment portions of the
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certificate of title and then filed the documents with the clerk. The father also
contacted his insurance company to add the vehicle to an existing policy with his
insurer, Kentucky Farm Bureau.
Shortly thereafter, the father gave the son possession of the vehicle.
They completed and executed a vehicle transaction record, but they could not
complete the assignment and warranty of title section on the reverse side of the
certificate of title as the father had not yet received a certificate of title from the
Kentucky Transportation Cabinet. Because they could not complete and file all the
necessary papers to transfer title on that visit, the father gave his son a proof of
insurance card from Farm Bureau and a note which stated that the son had his
permission to drive the automobile. When the father received the certificate of
title, he mailed it to his son. The son promptly signed the certificate of title and
then obtained his own policy of liability insurance from Omni.
But before the father received and executed the certificate of title, the
son was involved in an automobile accident. The father immediately signed the
certificate of title and filed the paperwork with the clerk. In contesting coverage,
Omni argued that, since transfer of title of the automobile was not accomplished
until after the accident, the father still owned the automobile at the time of the
accident.
After considering the holding in Nantz and the language of KRS
186A.215(4), this Court agreed. This Court noted that under KRS 186A.215(4), it
is the responsibility of the individual transferor and transferee to see that the
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transfer is accomplished. Furthermore, the Court pointed out that the assignment
and warranty of title had not been notarized until after the accident. Thus, since
the father had not completed or delivered the documents prior to the accident, he
remained the owner of the vehicle for purposes of the MVRA. Omni at 726-27.
In this case, Charles and Nadeau had executed the transfer of title
section on the certificate of title and had filled out an odometer statement. Thus,
Charles and Nationwide argue that they completed all necessary steps for
transferring title of the truck to Charles. Safe Auto contends that filing of the
certificate of title is necessary to transfer ownership. In addition, Safe Auto argues
that Charles and Nadeau did not complete all necessary steps to transfer title
because they had not completed the application for title or a vehicle transaction
record (VTR) form.
The trial court focused on the fact that the record title was still in
Nadeau’s name at the time of the accident. We do not find this fact controlling.
KRS 186A.215(1) requires the transferor to execute the assignment and warranty
of title and odometer statement on the certificate of title. The transferor must then
deliver the title to the transferee. At that point, the transferee has the duty to sign
the title and complete the application for a certificate of title. KRS 186A.215(2).
The certificate of title and the application shall then be delivered to the county
clerk for filing. KRS 186A.215(3). But if it comes to the attention of the
transferor that the transferee has not submitted the necessary paperwork to the
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county clerk within fifteen days, the transferor must submit an affidavit stating that
he has transferred his interest in the vehicle. KRS 186A.215(4).
As pointed out in Omni, both the transferor and the transferee have the
duty to ensure that that the transfer is accomplished. However, KRS 186A.215(4)
allows the parties a fifteen-day grace period after completion of the paperwork to
file the certificate of title with the clerk. Thus, the statute clearly contemplates that
there may be a delay between the execution of the transfer of title and the filing
with the clerk.
Consequently, we conclude that filing of the paperwork is not a
prerequisite to transfer of title between an individual seller and an individual buyer.
Rather, title to a vehicle transfers upon seller’s and buyer’s completion of the
transfer of title and odometer statement on the certificate of title and delivery of the
completed form to the buyer. In this case, the parties completed these sections and
Nadeau delivered the completed title to Charles. Furthermore, Nadeau had
obtained a release of the lien, removing any impediment to filing of the title.
We also disagree with Safe Auto that Charles and Nadeau failed to
complete the necessary paperwork to complete the transfer of ownership.
Completion of the VTR is only necessary “if the space provided therefor on the
owner’s certificate of title fails to meet the Kentucky requirements for lawful
conveyance of title.” KRS 186A.215(1). The certificate of title in this case was
issued after February 2000, and thus met the statutory requirements without filing a
separate VTR form. As noted above, KRS 186A.215(2) places the duty on the
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buyer, not the seller, to complete the application for a new certificate of title and
registration.
Under the circumstances presented in this case, Nadeau and Charles
completed all necessary tasks to effect the transfer of title to Charles prior to the
accident. Therefore, Charles was the owner of the vehicle for purposes of the
MVRA and coverage under the Safe Auto policy. As a result, the trial court erred
in granting summary judgment to Safe Auto.
Nevertheless, Safe Auto maintains that Charles and Nationwide have
failed to show that they were entitled to summary judgment in their favor. In
response to Charles and Nationwide’s motion for summary judgment, Safe Auto
claimed that there were disputed issues of fact which would preclude their
recovery even if Charles was the owner of the vehicle for insurance purposes.
First, Safe Auto states that Charles failed to present definitive evidence that he
purchased the vehicle from Nadeau. Although Safe Auto concedes that it accepted
the sale for purposes of its summary judgment motion, Safe Auto alleges that there
were irregularities in the transaction which cast doubt upon the legitimacy of the
sale.
However, we find that the transfer was effective upon completion of
the transfer of title and odometer statement on the certificate of title and delivery of
the completed form to the buyer. These documents were properly notarized and
Safe Auto does not present any evidence to challenge their legitimacy. Thus, any
irregularities in the other documentation were not material to the motion.
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Safe Auto also claims there were issues of fact regarding any other
coverage for the accident under Easterly or Nadeau’s policies. Similarly, Safe
Auto asserts that Nationwide, Charles and Howell must still prove the amount of
damages to which they are entitled. However, the only question before the trial
court was whether the Franklins were “owners” of the truck for purposes of the
MVRA and the Safe Auto policy. Since we have found that they were, Nationwide
and the Franklins are entitled to judgment on that issue. Any additional dispute
regarding the amount and apportionment of damages are outside of the scope of
this appeal. Rather, these issues must be raised under the appropriate provisions of
the MVRA. The trial court may take up those matters upon remand of this action,
if appropriate.
Accordingly, the judgment of the Jefferson Circuit Court is reversed,
and this matter is remanded for entry of a judgment in favor of Malinda and
Charles Franklin and Nationwide on the issue of coverage and for further
proceedings as necessary.
ALL CONCUR.
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BRIEF FOR APPELLANTS
MALINDA FRANKLIN, CHARLES
FRANKLIN AND JEFFREY
HOWELL:
BRIEF FOR APPELLEE:
David W. Zahniser
Cincinnati, Ohio
John M. Doyle
Louisville, Kentucky
BRIEFS FOR APPELLANT
NATIONWIDE PROPERTY AND
CASUALTY INSURANCE
COMPANY:
Robert E. Barnett
Louisville, Kentucky
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